Posts Tagged ‘American Manufacturing’

EU business activity picked up in March due to the European Central Bank printing money to spike economic growth, while

US manufacturing up, Chinese hitting the breaks.

Chinese factories slowed down fueling expectations of more monetary stimulus. U.S. manufacturing growth also rose despite a stronger U.S. dollar and the threat of an increase in interest rates from the Federal Reserve.

The EU Composite Flash Purchasing Managers’ Index (PMI) from data vendor Markit, jumped to a 54.1, nearly a four year high, from 53.3 in February. The surveys pointed to 0.3 percent EU economic growth in the first-quarter, Markit said, matching the previous three months’ but coming up short of the 0.4 percent median forecast in a poll taken earlier this month by Reuters. The ECB started buying more than a trillion euros worth of bonds in March in a quantitative easing effort.

A sub-index measuring euro zone prices jumped to 49.0, the highest in eight months. It has been below the break-even level of 50 for three years, suggesting inflation will not return any time soon. Oil prices have dropped significantly over the course of the past nine months and inflation rates across the world have followed suit.

Signs that the EU economy was gaining momentum such as, European shares and the euro rose up on the data, but a slowing in China kept oil and commodities-linked assets under pressure. Both the US dollar and corporate stocks have risen in recent months.

CHINA HITS THE BRAKES
China’s flash HSBC/Markit PMI dropped to 49.2 in March, an 11-month low, this is below the 50 level that separates growth from contraction. First-quarter economic growth in China is expected to slip below the government’s target of 7.0 percent, commonly seen as the level needed to keep employment steady.

Leaders in China are willing to allow a slower economic growth as long as employment stays strong. But the latest PMI employment sub-index dropped for a 17th straight month, hitting its lowest since the depths of the global financial crisis.

U.S. MANUFACTURING GROWTH AT FIVE-MONTH HIGH
The U.S. manufacturing sector has continued to grow, and reached a five- month high in March. The preliminary U.S. Manufacturing Purchasing Managers’ Index rose to 55.3, its highest since October, when the final PMI was 55.9.

The flash reading of the index measuring new orders also rose to 56.4 in March compared to 55.8 in February. Employment growth also rose in March from February.

Since the end of the Great Recession, one of the brighter parts of the U.S. economy has been the manufacturing sector. American manufacturers added $1.7 trillion to the U.S. economy, about 6.6% higher than the previous year, in 2010. The rest of the economy went up about 2.2%. As surprising as it may be, the United States manufactures more than any other country, including China. Also, in 2000 the U.S. factories reached their all time greatest output, a record they are close to reaching again much like they did in 2007. 2011 brought about some 120,000 new factory jobs. This was the first year-over-year increase in manufacturing employment since the late 1990’s. Despite this growth in manufacturing jobs, 11.8 million Americans work in manufacturing today; this is 40% less than the peak in June 1979. Looking back further, in 1953, 32% of American workers were employed in manufacturing. In today’s age, 9% of Americans are in manufacturing, a significant difference from the peak of American manufacturing. American factories have become much more productive in terms of output per hour, in the past three decades. This production increase is three and a half times higher than production was in 1979. The increase in production is helped by the offshoring of low-value jobs and the automation of factories. These productivity increases are more pronounced during recessions, as manufacturers lay off workers for the purchase and use of machines to increase production as the economy grows and demand rises. U.S. output increases and American manufacturing competing with low-cost operations in developing countries is good for the economy, but when it comes to new jobs and avoiding another recession, factories are not the answer.